Saturday 20 September 2008 19.01 EDT
First published on Saturday 20 September 2008 19.01 EDT

The collapse of XL Leisure Group, hot on the heels of airlines such as Zoom, Silverjet, Maxjet and Eos, has sent the travel industry into something of a tailspin over the last few weeks. Bookies are taking bets on which airline will go next and there are rumours of other companies under threat - but what does all this mean for the consumer? Is how we travel, how much we spend on travel - and even where we travel - all about to change?

Despite the apparent seriousness of the situation, it's important to remember that in every decade there seems to be a crisis in the travel industry. In 1974, the collapse of Clarksons left 35,000 stranded abroad - and the lack of funds available for the 100,000 people who had already booked their holiday led to the creation of the Atol bonding scheme. In the early Eighties, the first transatlantic budget airline, Freddie Laker's Skytrain, went spectacularly bust and in 2001, the travel industry as a whole lost millions after the attack on the World Trade Centre on 11 September.

Each time bookings have slumped and doom has been predicted, and each time the travel industry has survived and gone from strength to strength. But with airlines going down like dominoes, unpredictable exchange rates, eye-watering fuel prices and the arrival of eco-guilt, does the demise of XL herald the death of the travel industry as we know it?

BA boss Willie Walsh went on record last week saying that the airline industry was in its deepest crisis since the age of mass air transport began, and the International Air Transport Association's statement that 30 airlines had failed this year, with another 30 looking risky, certainly seems to bear that out.

Yet the figures can be misleading: 'We estimate 17 airlines have gone out of business this year,' says Sean Tipton, spokesperson for Abta, the Association of British Travel Agents. 'The IATA figure included airlines that had had their licences revoked and some tiny, American domestic airlines. Seventeen is still a high number, but that is globally. It's important to keep a sense of perspective on what's happening.'

Even the collapse of XL is not as dramatic as it seems; the company had just 21 aircraft and was a fraction of the size of the two biggest companies, Tui and Thomas Cook. 'While I feel sorry for all those people who had their holidays ruined, the fact is that a poorly run business has collapsed and that's the end of it,' says Dermot Blastland, MD of Tui UK.

Behind the histrionics and dramatic predictions, the fact is that the travel industry is in a pretty resilient state. 'Holidays have become a right, an essential part of leisure time, and whereas 20 years ago they were seen as a luxury and one of the first things to go when funds were tight, increasingly people won't compromise over their time away,' says Kate Kenward of Aito, the Association of Independent Tour Operators.

But if the uncertainty doesn't stop us booking, will it change how we book? And how can we be sure the company we book with is a safe bet? Some industry analysts are warning that size is important, that the big, familiar names in the travel industry are the safest bet. The two major tour operators, Tui (which owns Thomson and First Choice) and Thomas Cook Group (which incorporates MyTravel), are pretty secure, not least because they will benefit from the XL fallout. But both have admitted that their prices will have to rise next year; a combination of fuel prices and the strong euro, along with a reduction in the number of holidays being offered, means an end to very cheap packages.

In some cases, prices have already gone up; the day before XL collapsed, a week in Corfu with Olympic Holidays cost £200 - the following day, the same holiday was £352. Flights, too, have rocketed in price - a return ticket to Dalaman in Turkey is now around £190 return, rather than £90.

However, travellers should not rule out booking holidays with smaller specialist tour operators. 'Small companies don't have an aggressive business model, so if things slow down they don't have huge targets to hit, and can weather the losses,' says Joe Thomas, an analyst at Investec. 'Also, many small companies don't have seat allocations with airlines, so they don't have to sell flights and aren't affected by the fuel price hikes.'

In addition, many small companies have a high repeat-clientele rate, many of whom will be older, meaning they are less likely to be affected by the credit crunch. And although small companies like to keep it quiet, many, such as Exodus, Sunsail and Simply Travel, are actually owned by bigger companies (in this case, Tui), making them just as secure as their bigger siblings. And it's worth bearing in mind that the Atol cover for a small company is exactly the same as a big one; a full refund for your entire holiday and repatriation if the company goes bust while you are abroad.

But it's the increasing numbers of us who book holidays independently who need to take extra care. Although some airlines are perceived as secure, smaller ones may increasingly struggle. 'The well established names are a pretty safe bet,' says Kerry Ezard, editor of Airline Business. 'At the moment there are three major carriers emerging in Europe - BA, Lufthansa and Air France. They are actively consolidating their position - looking to buy smaller airlines, signing up to alliances with other carriers.

'The Open Skies agreement has definitely helped them and BA in particular is aggressively pursuing positive developments - they have filed for anti-trust immunity in the US with American Airlines, which will give them the right to co-ordinate their fares and schedules with AA.

'Virgin are furious about it, but although they are not similarly active, they have a strong balance sheet and I would consider them a pretty safe bet.'

Ezard believes Ryanair and Easyjet will also remain secure, and that charter airlines - such as Thomsonfly and Monarch - will actually benefit from the fallout at XL. 'It's the newer, smaller airlines that will go,' she says. 'Lufthansa has just bought into Brussels Airlines and I think we will see a lot of that in the coming months.'

Perhaps the biggest lesson for consumers from the XL collapse is that the lowest price doesn't always mean the best deal. 'XL's policy was to undercut the big boys, to say, "We can do it cheaper" - and it was a good business model,' says Francesca Ecsery of Cheapflights.co.uk. 'But their business wasn't vertically integrated enough to deal with the rise in fuel prices. They had 10 per cent of their costs in fuel, and although no one could have predicted such a huge increase in price, it meant that they simply didn't have the funds to cover their costs.'

The cost of all forms of travel will go up over the next few months, with all operators having to accommodate tough exchange rates and the continuing high price of fuel. As consumers we may have to pay a little more, but if what we're buying is peace of mind, then surely that's no bad deal.